At their lowest point in five years, electricity prices are exceptionally lower than what we’ve seen previously. But this isn’t expected to last, with a number of industry sources predicting an increase from early 2021.
Federal Energy Minister Angus Taylor said that wholesale electricity prices had significantly decreased over the last 12 months, calling it a win for consumers. However, AFR and Melbourne-based consultancy RepuTex are now reporting that these low prices aren’t likely to stay at the record lows.
In their article titled ‘Perfect storm drives down NEM wholesale electricity prices “but the only way is up”?’ RepuTex combines its forecasts with its latest outlook to give these predictions more context.
The report states that current wholesale prices are currently determined by a “perfect storm of downward drivers”, which may continue on for a year or so. However, as one of these elements change, wholesale prices may have no other direction to move except for upwards.
“After 2021, steadily rising gas prices [off a low base] are expected to begin to break the low price environment,” noted the report.
Additionally, the combination of demand from COVID-19 and the push for fresh renewable projects coming to fruition have helped wholesale prices stay low in 2020. Figures have seen this amount sit between $33 and $49 per megawatt-hour (17-45 per cent lower than the same period in 2019).
Economically, there’s no doubt that COVID-19 has had disastrous effects. But for the energy industry, the impact has been offset by a decrease in commercial demand and increase on the behalf of residential properties, as people continue to work from home.
Recently, two reports from AER and AEMO side-by-side confirmed that electricity prices were sitting at an all-time low for the last five years. Taylor said that federal was partially responsible for these changes. Wholesale prices currently make up one-third of residential bills.